Nonprofits R Us

During the fiscal-cliff debate, Americans must speak up on behalf of the vital third sector.

American history is rife with innovations, inventions, and ingenuity that define our unifying national pride. From key-laden kites sailing through electrical storms to information highways most of us never imagined, it is the stories of great thinkers, scientists, and artists which fill our collective impressions of our nation.

Perhaps first among all of America's greatest creations is the republic itself. Our founding fathers and mothers conceived a unique economic system that envisioned a three-sector economy: the private sector; the public or governmental sector; and finally, as the genius of it all, the third sector. It is essential for all three sectors to work in concert to achieve economic strength.

Alternately known as the Third Sector, the Independent Sector, the Not-for-Profit Sector, or most commonly the Nonprofit Sector, the middle ground between public and private is what makes these United States unlike other economic systems. With the nonprofit sector, societal functions that would be assumed to be the domain of government in most countries are instead entrusted to private hands.

Nonprofit organizations are the ultimate privatization move, simultaneously a case of efficient market-based economics and a demonstration of trust in our citizens to support one another. The nonprofit sector is true conservative philosophy in action and true liberal ideology borne out at the very same time.

What exactly is the nonprofit sector? At its core, it is a business structure like any other, yet unlike any other. The distinction is simple: In a nonprofit corporation, any net revenues over expenses cannot by law accrue to stockholders or private individuals. Instead, those net revenues must be reinvested in the mission of the nonprofit corporation. As such, the mission of a nonprofit corporation is paramount.

So why do we often hear the classification of "nonprofit" spoken of as a "tax status"? Because as private organizations carrying out what, in other, less innovative economic systems, would be public-sector work, nonprofit corporations are exempt from paying business tax. When you think about it, it would make little sense to tax corporations whose sole purpose is to carry out public services that taxes are ordinarily meant to fund. Indeed, there are no "profits" to tax; the profit is the societal benefit of carrying out the mission.

The next natural extension of the third-sector design is that individuals who choose to divert a portion of their private incomes into these public services are not taxed on those voluntary redirections. Doing so would be the same as taxing the nonprofit corporation itself, as the dollars never inure to a private individual's wealth or income. Thus the charitable-giving deduction in our tax code.

The charitable-giving deduction makes possible our unifying characteristic as an American economic system. Inexplicably, in a desperate grab for fiscal-cliff safety, Congress and the White House are both as of this moment looking to limit charitable-giving deductions. Our policymakers find themselves poised to drive a stake into the heart of what is the greatest distinction of our economic structure and social equity. When we take aim at inhibiting our independent sector, we move further by increments from our founders' wisdom.

Memphis is one of the most charitable cities in America, according to reliable statistics. We have a tremendous amount at stake in this debate. Most reasonable voices agree that there is an undeniable need for a society to address its communal needs collectively. Most reasonable voices also agree that those who succeed individually in business should benefit by private wealth. Certainly a solely public-sector economy is not just or smart, nor is a solely private-sector economy. Our founders knew this. It is the third sector, the nonprofit sector, that bridges the gap and allows each to be possible.

Americans are a spiritual and community-driven people who care. I see it every day in our work at the 96-year-old Memphis Brooks Museum of Art, in the community improvement we make possible across our city today, in the army of volunteers who make our wide impact possible, and in the children and Memphis families we educate every day.

I encourage you to speak up now on behalf of the nonprofit principle, lest, in the current economic muddle, we forget who we are as a people. At the same time, choose a charity, or charities, and give generously this year. When you do so, you are building our community's future and proving that charity is universal and moral, not separated by zip code or tax bracket.